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Amazon is famous for frequently lower prices and adding new pricing models for their Amazon Web Services (AWS) offering. Indeed they’ve done so over sixty times in the decade-plus that AWS has been around. To their credit, they are always looking for creative ways to make cloud computing more affordable. For most of those years, Reserved Instances (RIs) were the best way to earn a significant discount (often greater than 50%) by making a long-term commitment of one year or three years. AWS also benefits from RIs by knowing what equipment to invest in, and in which region, to pass those savings on to the customer.
According to Amazon’s website, AWS Savings Plans is a new and flexible discount model that provides you with the same discounts as Reserved Instances, in exchange for a commitment to use a specific amount (measured in dollars per hour) of compute power over a one or three year period.
That said, RI planning can be somewhat complex and prone to inefficiencies. When RI planning is optimized, the savings can be significant—but when done incorrectly, a three year commitment with the wrong configuration of RIs can be an expensive mistake. AWS Savings Plans is designed to help alleviate the hassles of buying RIs. The Savings Plans model allows AWS customers to receive discounts on cloud computing bills in exchange for purchase commitments.
Like RIs, Savings Plans can provide a significant discount compared to using compute resources on-demand, similar to the RI purchasing model. Unlike RIs, however, AWS Savings Plans provide greater flexibility on how these savings can be applied across consolidated bills and reduce the risk of unused commitments due to a changing infrastructure. While Standard RIs can be sold on the AWS RI Marketplace, there is no such option for Savings Plans, so proper planning is essential.
There are two types of AWS Savings Plans, each with subtle differences:
1. EC2 Instance Savings Plan
Save up to 72% by committing to an EC2 instance family and region, but enjoy size flexibility and the ability to change operating systems and even dedicated tenancy, which can be important for licensing and security.
2. Compute Savings Plan
Achieve up to 66% savings, similar to Convertible RIs, with greater flexibility, including instance family, size, region, and O.S., plus support for Fargate, AWS’ managed service for containers. Reserved Instances aren’t available for Fargate, so if you think you will be leveraging containers in the next three years, this may be important.
Instead of having to decide in advance which particular instance family, size, region and operating system to standardize on, AWS Savings Plan customers can purchase computing resources at an hourly rate. As with RIs, the commitment is for one or three years and can be paid in All Upfront, Partial Upfront or No Upfront payments. Organizations can then mix up instance types, sizes, regions, and even operating systems. As long as they are spending the amount specified, they will be getting a significant discount.
In the chart below, we break down the purchasing options and benefits of the Savings Plans versus Reserved Instances.
One of the main advantages of a Cloud Management Platform (CMP) is the ability to analyze and automatically recommend optimized usage of RIs, including support for All Upfront, Partial Upfront and No Upfront payments.
Like any pricing model, there is still room for error with AWS Savings Plans. Too high a commitment means paying for unused resources. Keep in mind, a Savings Plan is not a total spend commitment over a year, but rather a commitment for every hour of every day, 365 days a year. Most enterprises don’t have such evenly distributed workloads: They may be busy on Monday to Friday and less so over the weekend; there may be peaks and valleys based on the season. Uneven workloads are important to consider because AWS Cost Explorer makes recommendations based on 7, 30, or 60 days with no option for a longer term.
Before making a 1-year commitment, be sure to look for a recommendation engine that can leverage up to six months of historical data. Additionally, a CMP with the ability to automatically start and stop instances can ensure you stick to a schedule that optimizes your specific Savings Plan.
PRESS RELEASE: CloudCheckr Extends Cloud Cost Optimization Leadership with Immediate Support for AWS Savings Plans
A CMP can also help with resource right sizing to ensure optimized instance usage before you make any reserved purchases or sign up for a Savings Plan. After all, if your infrastructure is oversized, locking in that specific configuration or level of spending for the long term just magnifies that waste.
AWS Cost Explorer offers some basic right sizing but does not provide parameters to adjust. With Cost Explorer, you must accept Amazon’s predetermined settings of 40% over 14 days. To get more customization options, look for a right sizing CMP that can let you decide what level of utilization is suitable for right sizing—and over what time period. For example, you might want 20% over 7 days, or 60% over 30 days. With AWS built-in tools, you have no option to change those settings.
AWS Savings Plans are a welcome alternative to the complexity of Reserved Instance purchases, but both will have their place in the short term. RIs still are being sold and will be for some time. Indeed, many enterprises may have 2 years or more left on their RI plans and will continue to need to amortize, optimize, share and bill for purchased instances among departments and customers. A CMP that provides these features can eliminate complexity and increase efficiency.
CloudCheckr cloud management platform is first-to-market to support AWS Savings Plans. Read our press release to find out how CloudCheckr is uniquely positioned to support AWS Savings Plans and to help enterprises and resellers navigate the numerous pricing options now available to them.
We also have a detailed FAQ in our Success Center about how Savings Plans work, what the change means for the future of RIs, and how CloudCheckr plans to support the new model.
CloudCheckr cloud management platform delivers total visibility, making the most complex cloud infrastructure easier to manage. Customers deploy the CloudCheckr platform to secure, manage, and govern the most sensitive environments in the world—from government agencies to large enterprise and MSPs—with immediate results. CloudCheckr’s industry-leading solutions include Cost Optimization, Cloud Billing, Finance Management, Cloud Security, Total Compliance, and Cloud Automation.
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